First-Time Homebuyer’s Guide Made EasyAugust 21, 2019 // Posted in:
Buying your first home is part of “the American Dream,” and an exciting time when you plant roots for your future. It also comes with a hefty price tag and will most likely be your largest investment to date. With so many moving parts to the process (including moving all your stuff), knowing the facts can truly be the key to opening the front door of your new home. This month, Granite and TREND Transformations has put together an easy-to-follow first-time homebuyer’s guide to sort out the steps you’ll need to know when buying your first home.
Speak to a mortgage lender―or two or three
You’ve decided it’s time to buy your own home. But how do you know if it really is the right time or if you can afford it? Speaking with multiple lenders is the best way to explore your financial options to assess if buying a home is fiscally feasible. The goal is to get pre-approved for a home loan. You’ll receive an estimate of the size of the loan you qualify for, along with the interest rate. Pre-approvals are typically good for 90-to-120 days. There is a significant amount of paperwork you’ll need to submit to the lender, so it’s best to start gathering it all early so you’re ahead of the game.
Here’s what you’ll need:
- Bank statements
- Pay stubs
- W-2 forms
- 1099 forms
- Tax returns
(Tip: Reputable mortgage lenders will help you determine which type of loan is right for you. Plus, there’s no obligation!)
Choose the right loan for you
You will be amazed at how many types of home loans are out there today. We will discuss some of the more popular ones so you can determine which loan is best for you.
- Fixed rate mortgage—Just as the name implies, this traditional mortgage is fixed at an agreed rate and can be spread out for a determined number of years, including a 5-year, 10-year, 20-year, 30-year, and even 50 years. Just remember: The longer the time frame, the more interest you will be paying.
- FHA loans—Federal Housing Administration (FHA) loans are best for buying your first home since the down payment requirements may be less than for other home loans. New borrowers who qualify must meet the new FHA guidelines. As of 2017, new borrowers are required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program while new borrowers with less than a 580 FICO score will be required to put down at least 10%. Lenders use your FICO score to determine the interest rate you’ll receive on a loan and how likely you are to pay the loan back. So, it’s best to keep up with your credit rating and practice responsible payment habits to keep your FICO score as high as possible.
- VA loans—Veteran Affairs (VA) loans are unique. They are $0 down mortgage loans that are available to veterans, service members and select military spouses who have served in the United States Armed Services. They are issued by private lenders and are guaranteed by the U. S. Department of Veteran Affairs. The requirements vary, depending on the year of service and whether the discharge was honorable or dishonorable.
- Interest-only mortgages—Don’t let the name fool you. Interest-only mortgages do not mean you only pay the interest on the loan. In fact, it means the loan has the option to make an interest-only payment. Although this type of mortgage may keep your payment lower than a principal and interest payment, it’s important to know your money is only going toward interest and not being applied to the principal amount to pay down the loan.
- Option ARM Mortgages—Adjustable Rate Mortgages (ARM) mortgages can be tricky. Here’s why: The interest rate fluctuates, which means borrowers can choose from different payment options and index rates. This can be risky, especially if you choose the minimum payment option.
(Tip: Maintaining the best possible credit score is key to qualifying for a low-interest rate. Be sure to pay your bills on time and periodically check your credit score for anything that doesn’t look familiar. Credit Karma is a great resource for managing and staying on top of your credit.)
Set a budget
Now that you know the amount of loan you qualify for, it’s time to crunch the numbers to see if you can afford to buy your first home. Here are the top three questions to keep in mind:
- Do you have enough money to make the mortgage payment? This may sound like an obvious question, but keep in mind there are other payments that come along with paying a mortgage. This brings us to our second question.
- Do you have enough income to pay the property taxes and homeowner’s insurance? Did you forget about those? You can have those payments rolled into your mortgage payment, so it’s important to factor those costs into your monthly payment. If the payment is out of your budget, now may not be the right time to buy.
- Do you have enough money to maintain the property? Owning your own home comes with great responsibility. If you’ve been renting, then you know the cost and responsibility of repairs has always been on your landlord. Homeowners are their own landlords. With that comes the responsibility of maintaining your home and keeping it in good repair. Be sure you have enough money saved for unexpected repairs, or you could find yourself in a bad situation.
Skip the online search and choose a real estate agent
It may difficult to resist the urge to search for your dream home online, but experts agree it’s best to work with a professional real estate agent instead. Here’s why:
- Browsing online listings can tempt you to fall in love with a home that is out of your price range. This is not the time to want something you can’t afford, especially when you’ll be paying for it over the next few decades.
- Working with a professional takes the guess work out of the home-buying process.
- There’s no cost to working with a real estate agent. (That won’t happen often when buying your first home.) This is a great way to get free advice from someone who knows the industry and can advise you on first-time homebuyer tips.
(Tip: When searching for a real estate agent, be sure to check out what neighborhoods they cover, how many years of experience they have, the number of homes they’ve sold, and most importantly― read the reviews carefully.)
Determine where you want to live
House hunting is easier when you narrow down where you want to live. Remember, the greatest neighborhood might not be in your best interest. Here are some things to consider:
- Commuting to work
- Proximity to family and friends
- School district if you have school-aged children or are planning on starting a family.
(Tip: Explore your favorite neighborhoods to get a feel for the community. You may even want to dine at some local restaurants or check out the local shops.)
A fixer-upper―to buy, or not to buy
Buying a fixer-upper may be a tempting option since you can potentially get more bang for your buck. A fixer-upper can put you in a larger house in a desirable neighborhood that you would not have otherwise been able to afford. This decision can go either way, however, depending on some important factors.
Here are some home buying questions to consider before buying a fixer-upper:
- Do you have the vision and creativity to see the possibilities of what an older home has the potential to become?
- Do you have the money needed to put into the renovations?
- Do you have the skills to do some of the work yourself, or enough cash on hand to hire someone?
- Do you have the time to commit to the renovation?
- Do you have the patience to live in a work zone while renovations are going on?
(Tip: If you answered “yes” to most of the above questions, then buying a fixer-upper may be the way to go.)
Decorating and renovating your new home
This is the fun part, when you can finally turn your house into a home. Putting personal unique touches and creative decorating into play starts with a game plan.
Here are some decorating tips to help you get started:
- Start with your bedroom—Did you know you spend almost one-third of your time in your bedroom? Getting your bedroom up to par is a great way to set the tone for your home. If you’re on a tight budget, you can start by buying quality bedding. It can make all the difference in creating a beautiful sanctuary.
- Resist the temptation to buy everything at once—Now that you’re in your new home, it’s normal to want every room “just so.” The reality is you just spent a large amount of money to buy your home, so going overboard by furnishing it too soon can cause a financial drain. (Remember: You must have enough money to make the payments!) It’s best to live with the space for a few months to get a feel for what you really want and where you want it to go.
- Remodeling-kitchen and bath renovations—Chances are you’ll want to spruce up the kitchen and baths at some point. These renovations can be costly but there are ways to refresh these rooms inexpensively without busting your budget. Switching out cabinet hardware or lighting fixtures in a bathroom go a long way in giving the space a lift without going all out. If your budget allows for a bit more renovating, then Granite and TREND Transformations is your go-to partner for beautiful cabinetry and today’s most trending and popular countertops and surfaces. With most jobs completed in one day with little or no demolition, you can transform your new home into the space you’ve always dreamed of.
(Tip: Declutter when packing up your old place by selling or donating things you haven’t used in a while. This will not only save you time and money with your moving expenses, but it gives you a fresh start.)
Everyone at Granite and TREND Transformations wishes you all the best in buying your first home. Contact us today to learn more about our beautiful etheriumTM by E-Stone surfaces, or to schedule your free in-home design consultation.
Happy house hunting!